Posts tagged ‘House Prices’
Enquiries from new buyers fell for the seventh month in a row during June as the property market showed further signs of cooling, research indicated today.
The Royal Institution of Chartered Surveyors said tougher lending rules under the Mortgage Market Review were causing a slow down in property sales.
At the same time, speculation about when interest rates will start rising, combined with heightened rhetoric from the Bank of England about the risks of the property market have increased buyer caution.
The group said demand for property was now at its lowest level since the beginning of 2013, with the London market particularly affected by the new wariness among buyers.
The lower level of demand led to a slowdown in newly agreed sales, with this measure recording its most subdued pace of increase since the autumn of 2012.
At the same time, the number of new properties coming on to the market increased for the first time since December 2013, helping to further ease the mismatch between supply and demand.
The Bank of England has indicated that interest rates could start to rise by the end of this year.
It has also introduced measures to help cool the property market, after warning that booming house prices could threaten the UK’s economic recovery.
Under these measures lenders must ensure no more than 15 per cent of new mortgages go to people borrowing more than 4.5 times their income.
Banks must also check whether borrowers could continue to afford their mortgages if interest rates rose by 3 per cent.
Simon Rubinsohn, RICS chief economist, said: “The Bank of England’s recent introduction of a ceiling on high loan to income lending and a 3 per cent interest rate stress test is unlikely on its own to have an immediate influence on the market.
“However, rhetoric from key officials at the Bank including Mark Carney, alongside the consequences of the introduction of the MMR are already slowing momentum particularly in London.
“Buyer enquiries in the capital are now slipping back which suggests that the very sharp upward move in prices will flatten over the coming months.”
But he added that he expected the “more hard fought recovery” in the rest of the country to remain intact.
Despite the slower market, a balance of 53 per cent of surveyors still reported house price increases during June, although the figure was down slightly from 56 per cent in May.
Surveyors said prices rose in all 12 regions of the UK, with the South East and Northern Ireland experiencing the strongest growth for the second consecutive month.
But the group added that the rate of price growth in London appeared to be easing.
Going forward, the balance of surveyors expecting prices to rise rather than fall during the coming three months dropped to 26 per cent, down from 46 per cent in May, due to slowing demand and increased supply.
Today’s figures come the day after Halifax said house prices rose at an annual rate of 8.8 per cent in June, although they fell by 0.6 per cent during the month itself.
The typical property in the UK currently costs £260,311, according to Zoopla.
House prices rose at their fastest rate for nearly seven years during June, figures showed today.
The average cost of a home was 8.8 per cent higher during the three months to the end of June than it had been a year earlier, according to mortgage lender Halifax.
The rise, which was the biggest annual gain seen since October 2007, left the typical UK property costing £183,462.
But house prices slipped by 0.6 per cent during June itself, the fourth monthly fall recorded by the Halifax index since December.
The group stressed that monthly house price changes could be volatile, with June’s fall coming after values surged by 4 per cent in May.
It added that the three-month-on-three-month change, which is considered to be a more reliable indicator of underlying market trends, showed prices rising by 2.3 per cent.
House price changes according to this measure have now remained in a narrow range of 2 per cent to 2.3 per cent since June last year.
Stephen Noakes, mortgages director at Halifax, said: “Housing demand continues to be supported by an economic recovery that is gathering pace, with employment levels growing and rising consumer confidence, although real earnings growth remains sluggish.”
Today’s figures are in line with data reported by Nationwide, which also showed strong annual gains in June, with house prices rising by 11.8 per cent.
The jump left the average property costing £188,903, the first time they have surpassed the 2007 peak reached before the housing market correction.
the heat has come out of the housing market
The strong house price growth seen in recent months has led to speculation that a bubble may be building up in the property market.
In June, the Bank of England’s Financial Policy Committee announced measures aimed at ensuring a house price boom does not threaten the economic recovery.
The steps to cool the market included a cap under that lenders must ensure no more than 15 per cent of new mortgages went to people borrowing more than 4.5 times their income.
It also introduced a new stress test, under which banks must check whether borrowers could continue to afford their mortgages if interest rates rose by 3 per cent.
But the measures were less draconian than had been predicted and came amid signs that the housing market was already beginning to moderate.
New buyer enquiries fell for the sixth consecutive month during May, according to the Royal Institution of Chartered Surveyors.
HM Revenue & Customs also reported that property sales fell by 3 per cent during the month, to stand below 100,000 for the first time in six months.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “With estate agents reporting that applicant levels are falling, fewer sealed bids and packed open houses, some moderation is returning to the market.
“As more property comes up for sale, with vendors worrying that they may have missed the boat, the heat has come out of the housing market.”
Meanwhile, speculation that the Bank of England’s Monetary Policy Committee could start raising interest rates by the end of this year, has left potential buyers cautious about taking on high levels of debt.
The typical property in the UK currently costs £260,311, according to Zoopla.
Less than one in 10 people who work in London can afford to buy a typical property within an hour’s commute of the capital, exclusive research from Zoopla can reveal.
The figures are the latest evidence of the struggle ordinary workers, on an average wage, have when it comes to buying a home.
With property prices in London rising more than £60,000 in the past year alone, many potential buyers will be widening their search – particularly if they have families and are looking for more space.
But the Zoopla figures show they will be forced to look further afield than even they anticipated.
Just nine per cent of properties for sale within an hour’s commute of the capital are within a buyer’s budget if they earn an average London salary of £33,965.
Jonathan Harris, of mortgage brokers Anderson Harris, said: “It is not just London which has enjoyed significant house price growth, but the surrounding areas have also seen prices rise over the past few months. This has meant that those spreading their net and looking to buy cheaper property outside of the capital are finding it is not that easy with family homes in particular at a premium.
“Commuters are having to look further afield beyond the magic ‘one hour maximum’ commute for an affordable home, which is do-able if you don’t have to be in London every day of the week. Otherwise, it can put a strain on family life, with fathers in particular having to leave the house before the children are awake and returning after they’ve gone to bed.”
The calculation is based on a buyer with a 25 per cent deposit and borrowing a maximum of 4.5 times their annual salary.
It means someone earning around £33,000 would be able to afford to buy a property valued at £200,000.
Zoopla can reveal a worker needs to earn more than £90,000 a year to buy an average London property valued at £567,392 – restricting them to less than 70 per cent of homes for sale that are within an hour’s commute of London.
The figures are based on a maximum income multiple of 4.5 times income. Borrowers have previously been able to secure higher income multiples, but fears about the property market overheating in London have led to the Bank of England introducing new measures.
It is restricting the number of homeowners able to borrow more than this amount.
By October, banks will only be able to lend 15 per cent of their total residential mortgages at or above this level.
The Zoopla figures also reveal that despite a £282,500 income, workers would still not be able to afford 5 per cent of homes within an hour’s commute of the capital.
How much would you expect to pay for a studio? Possibly between £10,000 and £100,000, depending on the location. But not for a new build studio in London’s Vauxhall, which has an asking price of more than £1m.
The ‘Manhattan-style’ studio is on the fifthteenth floor of The Tower, a 50 storey building at One St George Wharf.
It is currently on the market for £1,153,800 and provides 641 sq ft of living space, which is not much larger than the size of a London Underground carriage.
The property includes a bathroom and boasts a 999 lease.
Aston Rock, the estate agent handling the sale, described the homes in the Tower as ‘fresh, spacious and ultra-modern’, adding the studio is ‘open plan and fitted with the latest mod-cons’.
The Tower includes a health and fitness club, along with an onsite Tesco Express.
It is part of the regeneration of Nine Elms on South Bank.
St George Wharf is a riverside development spanning across seven acres of the regeneration site and is just moments away from Vauxhall Underground Station.
The value of a typical property in St George Wharf has risen £115,368 in the past year to £1,002,964.
What does around £1,153,800 buy in the rest of the country?
1. Seventeen bedroom Scottish mansion set in five acres, with stables and paddock.
2. Detached house in Southampton with four bedrooms – all ensuite – along with a games room, sauna and steam room.
3. A historic Grade II listed manor house in Wales with nine bedrooms, indoor pool and caravan site in 9.25 acres with sporting rights on 300 acres.
London house prices are rising at double the rate of those in the rest of the UK as different factors drive the capital’s property market.
The typical cost of a home in London soared by 17 per cent during the year to the end of April, according to the Land Registry.
But the next highest level of growth was just 7.8 per cent in the East, while in the North East and Wales prices edged ahead by just 2.9 per cent and 3 per cent respectively.
The London property market has traditionally led the rest of the UK, with housing market recoveries and booms typically starting in the capital, before rippling out to other regions.
But the difference in price growth has now become so great that commentators are questioning whether it is still accurate to talk about the UK housing market as a whole.
House prices in London are now 25 per cent above their pre-correction peak, while in parts of prime central London they are 55 per cent higher.
But in other part of the country prices remain well down on previous levels, with property values in Wales and the North East still 15 per cent lower than they were before the correction.
Matthew Pointon, property economist at Capital Economics, pointed out that the dynamics driving the London market were very different to those in the rest of Britain.
He said: “The London economy is outperforming the rest of the UK and there is a lot of migration coming in.
“The supply and demand is even tighter in London than the rest of the country and there is the problem of foreign demand as well.”
He added: “I don’t think it has ever been accurate to lump [London and the rest of the UK] all together.”
Foreign demand is having a significant impact on the London market, with overseas buyers snapping up properties in the capital.
By contrast in the rest of the UK, first-time buyers are the driving force of the market.
Nitesh Patel, Halifax housing economist, said:“The London housing market is very different from the rest of the UK. In the prime locations of central London demand is driven by high net worth individuals many of who are cash-rich foreign buyers.
“London as a whole has a population density that is 21 times larger than the British average – 5,285 people per square km, compared to 253 per square km for the UK.”
He said the growing imbalance between housing demand and supply was adding upward pressure on the value of homes in the capital.
But in the regions, the economic recovery is only just becoming more firmly established, and has yet to lead to a significant decline in unemployment.
Ray Boulger, senior technical manager at mortgage broker John Charcol, pointed out that having such diverse property markets created a headache for policy makers.
He said: “You might in an ideal world want to have different economic policies for rest of Britain as you have for London, but Britain is in the same position as the ECB and has to have one policy for whole country area.”
Richard Sexton, director of e.surv chartered surveyors, agreed.
He said: “The distinctive market in the capital continues to cloud the waters. Outside the cash-rich London and the South East, many regions are still in the early days of the recovery.”
He pointed out that housing markets in areas like the North East and North West were far more ‘sedate’, with first time buyers playing a key role in keeping the property market aloft.
He said: “With the capital dominated by foreign investors and buy-to-let landlords, there’s been an intensifying clamour for intervention.
“But any action must be prudent, to avoid any negative impact on the more susceptible areas of the country.”